Greg Mankiw's Blog

Saturday, November 30, 2013

The Pope's Rhetoric

“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” Francis wrote in the papal statement. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system.”

A few reactions:

First, throughout history, free-market capitalism has been a great driver of economic growth, and as my colleague Ben Friedman has written, economic growth has been a great driver of a more moral society.

Second, "trickle-down" is not a theory but a pejorative used by those on the left to describe a viewpoint they oppose. It is equivalent to those on the right referring to the "soak-the-rich" theories of the left. It is sad to see the pope using a pejorative, rather than encouraging an open-minded discussion of opposing perspectives.

Third, as far as I know, the pope did not address the tax-exempt status of the church. I would be eager to hear his views on that issue. Maybe he thinks the tax benefits the church receives do some good when they trickle down.

Wednesday, November 20, 2013

On W

Sunday, November 17, 2013

IMF Research Conference

I recently had the pleasure of attending the IMF Annual Research conference (where I was a discussant of a paper by Reifschneider, Wascher, and Wilcox in Session 3). You can watch the conference online here.

Monday, November 11, 2013

Is community rating fair?

A large part of the motivation of the Affordable Care Act is to provide insurance to those with pre-existing conditions. Under the law, insurance is offered to everyone at a price based on overall community risk, not the risk estimated by the insurance company based on a person's particular characteristics. That has been deemed "fair" by advocates of the law.

I wonder whether advocates of this view are concerned with other insurance markets. Teenage drivers pay a lot more for auto insurance. The old pay a lot more for life insurance. Life insurance companies require health screening before granting a policy. Is this a problem, or the natural and desirable functioning of markets?

In the law, having children has been deemed a pre-existing condition, although it is not quite described as such. Everyone is now expected to buy insurance to pay for pregnancy and maternity care, even those who never intend to have children. The goal is to spread the risk of childbirth among the larger community.

But having children is more a choice than a random act of nature. People who drive a new Porsche pay more for car insurance than those who drive an old Chevy. We consider that fair because which car you drive is a choice. Why isn't having children viewed in the same way?

I don't know the answer to these questions. But it does seem that fairness in health insurance pricing is being viewed very differently than fairness in pricing other types of insurance. I wonder why.

Monday, November 04, 2013

The Prescient David Cutler

Via the Washington Post, here is a 2010 memo that my Harvard colleague David Cutler wrote to Larry Summers about the implementation of the Affordable Care Act. Its subject line is "Urgent Need for Changes in Health Reform Implementation."

David concludes: "All in all, the administration has immense decisions to make about transforming health care delivery and coverage. But no one I interact with has confidence that your current personnel and configuration is up to the task."

Sunday, November 03, 2013

Robert Frank on Casinos

About Me

I am the Robert M. Beren Professor of Economics at Harvard University, where I teach introductory economics (ec 10). I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.